Suez and GdF plan merger

8 March 2006

French multi-utility Suez and national gas giant Gaz de France (GdF) have announced a friendly merger between the two groups that will create one of Europe’s largest energy companies with annual revenues of €64 billion in energy and environmental services.

The merger will be preceded by the payment of an exceptional dividend of €1.25 billion by Suez to its shareholders, equivalent to €1 per Suez share following which the share exchange ratio in the merger will be one for one, representing a premium for GdF shareholders of 3.9% on the basis of the average stock price over the last three months.

The energy asset portfolio, primarily located in France and Belgium, will allow it to benefit from the gas-electricity convergence and to gear up to serve the fully liberalised energy market in July 2007, the companies said.

The new group will become the fifth largest producer of electricity, including owning the Tihange nuclear plant in Belgium, and the operator of the largest European gas transport and distribution network.

In the short term, it is expected that the group will be capable of generating €500 million in operational synergies per year before tax.

Significantly, according to the company statements, the merger has the support of the French and Belgian governments.

The transaction is scheduled to be completed in the second half of 2006 when Suez's Gerard Mestrallet will head the group with GdF's Jean-Francois Cirelli as his second in command. The merged group, with Suez holding 56.7% and GdF 43.3%, will in fact emerge with the French government as its largest stakeholder with 34.6% of GdF and a diverse holding structure for Suez.

Suez owns Electrabel, which operates seven reactors in Belgium, and has plans to invest in further nuclear projects.

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